India's fear gauge, the volatility index (India VIX) spiked over 59 percent to 21.94 on April 7, marking one of its sharpest single-day surges in 5 years. Heightened volatility followed as Indian benchmarks opened with 5 percent cuts amidst sharp selloff across global markets. Market experts said that such a steep spike in the VIX was last witnessed during the COVID-19 crisis, and its recurrence now signals panic in the system, with the potential for wild swings in either direction.
Rajesh Palviya Jain, Senior Vice President - Research (Head Technical and Derivatives) at Axis Securities, said the sharp move in the India VIX points to elevated risk and uncertainty. “With the VIX rising sharply, we could see Nifty swinging anywhere between 500 to 1,000 points in the coming sessions,” he explained.
He further noted that the Nifty breaching its 100-week moving average—a level last broken during the COVID-induced market crash—is a worrying sign.
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“This indicates deep fear and a possible shift in the near-term trend. Unless the VIX cools off to more stable levels around 18, we are unlikely to see any meaningful or sustainable recovery,” Palviya added.
Ajit Mishra, Senior Vice President - Research at Religare Broking, echoed this sentiment. He said that such an abrupt spike in the VIX is a negative sign for the broader market and reflects near-term uncertainty. “The jump we are witnessing now is comparable to crisis-level volatility,” he said.
The elevated fear was not limited to India alone. Global markets also shuddered under pressure after China retaliated with 34 percent tariffs on US goods, stoking fears of a full-blown trade war. The CBOE VIX, which measures expected volatility in the S&P 500 based on options trading, surged past 39.60—its highest level since the unwinding of the yen carry trade in August—signaling intense fear among global investors.
Adding fuel to the fire, US Federal Reserve Chair Jerome Powell adopted a more cautious stance on rate cuts, pausing any further reductions amid rising inflation concerns and slowing growth expectations. This further intensified the risk-off sentiment gripping financial markets worldwide.
Historically, there have been only 2 instances when the India VIX crossed the 50-mark - once during 2008 financial crisis and the other was during March 2020 Covid-19 pandemic.
Looking ahead, Palviya believes that the next critical level for the Nifty is around 21,200—a level that aligns with the election-period low and represents a key support. Breaching this zone could signal not just a continuation of the current downtrend but a breakdown of a broader structural range. Meanwhile, Mishra from Religare Broking pointed to 21,300 as a significant level of support in the near term.
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